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The fund manager who defended the Globo fraud to the end weighs in to bat for First Derivatives

By Tom Winnifrith, The Sheriff of AIM | Tuesday 16 October 2018


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


We pointed out numerous red flags at Globo (GBO) for two years before finally sinking the fraud by publishing Gabriel Grego’s dynamite dossier but some folks knew better. In the fund management community the fraud’s biggest supporter was Harry Nimmo of Standard Life whose fund (other folks cash) were on the register to the bitter end. Harry was a true Globo believer. Now he has weighed into bat for First Derivatives (FDP) which has also, arguably, committed fraud as we revealed HERE.

Nimmo was quoted in the Torygraph’s Questor column last week HERE  

What is perhaps interesting is that his tone has changed suggesting that he is not quite as confident as he once was about Globo, oops I meant First Derivatives.

From January this year, also in The Telegraph:

‘”Our strong view is that the outlook is very good for First Derivatives, which is one of the largest holdings in several of our funds. It’s not a ‘blue sky’ tech firm, it’s a profitable, dividend-paying company with good cash generation and a strong balance sheet…Our strategy is to find fantastic companies such as this and hold them for a long time.”’

But in the same paper on Friday last week:

"Nimmo acknowledged that margins tended to be lower in consultancy than in software. He said First Derivatives didn’t separate results from its two arms, which would make the business easier to understand."

See what I mean?  Big change in tone...  He's admitting to poor disclosure, and a predominance of services – I agree.  And:

“I’ve been an investor since 2010 and have no reason to believe that the management is anything other than genuine in what they are doing. We feel that we know this company well and trust the managers.”

Hold on... The first sentence is not exactly a ringing endorsement.  And, from that second sentence, should we take it that he knows the company and trusts its managers?  Or does he just feel like he knows the company and trust its managers?  It reads like he’s admitting doubt over his own analysis.

He goes on to describe Matt Earl's dynamite dossier which we published HERE piece as "baseless".  That made me chuckle.  He is renowned in Edinburgh investor circles for the brevity of his investment recommendation papers.  I understand that a recent investment was justified internally with just five bullet points.  Now, nobody's saying he doesn't carry out deep forensic analysis, like Matt Earl and his team, but perhaps more detailed notes would allow others to spot the gaps.  Everyone has gaps. 

For instance, I wonder if any of the bullet points on his investment case for Globo plc (ahead of his fund becoming the largest institutional investor) addressed the company's suspiciously large receivables balance...

He concludes by describing Shadowfall's timing as "exquisite".  I thought about that for a while.  Why would he pay them a compliment?  Well, attributing the collapse in FD's shares to timing is probably an attempt to undermine the thesis.  In other words: “the market isn’t dumping FD because it’s been outed as a bag of shit - No, no -  it’s dumping everything on a growth multiple.”

Our stance on First Derivatives remains sell


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